FedNow Service: Regulations and Participants

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Questions and Answers

Which of the following actions can a Service Provider perform on behalf of a FedNow Participant?

Initiate, transmit, or receive messages.
Operate the Electronic Connection used for sending or receiving messages.
Obtain information and select security procedures.
All of the above. (correct)

According to the FedNow Service guidelines, what is a requirement for originators and beneficiaries of instant payments?

They must be direct participants in the ACH network.
They must be either FedNow Participants or have a direct U.S. deposit account relationship with a FedNow Participant. (correct)
They must use a correspondent bank for all transactions.
They must be non-bank entities.

Under what conditions can the FedNow Service support instant payments involving non-bank account holders?

When the non-bank is not a US resident.
When the non-bank uses an international bank.
When the non-bank acts as an intermediary bank.
When the non-bank is acting as an agent for the Ultimate End Customer. (correct)

What is a key requirement regarding the Ultimate End Customer when a non-bank is involved in an instant payment?

The Ultimate End Customer must be a resident or domiciled in the United States and have immediate access to funds received. (A) Signup and view all the answers

What role does a Correspondent play within the FedNow service?

They maintain a Master Account with a Federal Reserve Bank and agree to maintain a Settlement Account for another FedNow Participant. (C) Signup and view all the answers

If a FedNow Participant uses a Service Provider, which of the following statements accurately describes the responsibilities?

The requirements applicable to FedNow Participants also apply to the Service Provider when it performs functions as an agent on behalf of the FedNow Participant. (B) Signup and view all the answers

To facilitate an instant payment by a non-bank on behalf of an Ultimate End Customer, which condition must be met regarding the flow of funds?

No intermediary bank other than a Reserve Bank can be involved in the funds transfer. (D) Signup and view all the answers

What must be satisfied for any payment received by the non-bank on behalf of the Ultimate End Customer?

It satisfies the payor’s obligation to the Ultimate End Customer. (B) Signup and view all the answers

A financial institution wants to use the FedNow Service for both Customer Credit Transfer and Liquidity Management Transfer. What is the correct setup?

Select only Customer Credit Transfer, as it automatically opts the FI into Liquidity Management Transfer. (B) Signup and view all the answers

Which entity is primarily responsible for configuring the Participation Type within a FedNow Participant Profile?

Federal Reserve Banks, based on a request from the Participant or Service Provider, with confirmation from the Participants. (A) Signup and view all the answers

A correspondent bank uses a service provider to connect to the FedNow service; what authorized connection profile is configured?

Service Provider - Correspondent connects to the FedNow Service via a Service Provider. (B) Signup and view all the answers

A financial institution uses the FedNow Service for settlement purposes; what is the participation type?

Settlement Only. (B) Signup and view all the answers

Which action is required for a financial institution to begin using the Customer Credit Transfer service within FedNow?

Request the Federal Reserve Banks to configure the Customer Credit Transfer participation type. (D) Signup and view all the answers

A correspondent is not connected to the FedNow Service and does not have a FedNow Profile. What are the implications of this?

The correspondent will not be able to receive any messages or reports directly from the FedNow Service. (A) Signup and view all the answers

What determines the type of service(s) a Participant can utilize within the FedNow Service?

The participation type. (B) Signup and view all the answers

Which participant connects directly to the FedNow Service on behalf of one or more FedNow Participants?

Service Provider. (C) Signup and view all the answers

Which of the following best describes an Authorized Connection Profile (ACP) within the FedNow Service?

A profile defining connectivity settings for a Participant or Service Provider to process messages and payments. (B) Signup and view all the answers

What is the primary function of a 'Connection Point' in the context of the FedNow service?

To enable a Participant or Service Provider to communicate with the FedNow Service through a grouping of endpoints. (D) Signup and view all the answers

In the FedNow service, what differentiates an 'Instant Payment Message' from an 'LMT Payment Message'?

LMT Payment Messages specifically instruct a Federal Reserve Bank to effect a Liquidity Management Transfer, while Instant Payment Messages are other payment orders. (C) Signup and view all the answers

What is the main purpose of 'Nonvalue Messages' within the FedNow Service?

To carry information that are not payments and do not generate accounting entries. (C) Signup and view all the answers

What is the purpose of a 'Ping' in the FedNow Service?

To verify a Participant's connection to the FedNow Service. (A) Signup and view all the answers

How do 'Queues' function within the FedNow Service, especially regarding message direction?

Queues are used to send and receive messages and are defined as either 'to-FedNow' or 'from-FedNow' to indicate message direction. (C) Signup and view all the answers

What role does a 'Correspondent' play in the FedNow Service?

Maintains a Settlement Account for another FedNow Participant and holds a Master Account with a Federal Reserve Bank. (C) Signup and view all the answers

What is the role of a 'Respondent' in the context of FedNow Service transactions?

The Respondent uses the Settlement Account of a Correspondent to settle FedNow Service transactions. (B) Signup and view all the answers

What is the key difference between a 'Liquidity Management Transfer Receive Only' participant and a 'Liquidity Management Transfer Send and Receive' participant?

The 'Receive Only' participant can only receive LMT messages, while the 'Send and Receive' participant can both send and receive LMT messages. (C) Signup and view all the answers

Which component of participation type is applicable to all participant profiles?

Receive Account Debit/Credit Notifications (Correspondent) (B) Signup and view all the answers

For which participation types is the 'Reserved Receiver FI Response Time' applicable?

Customer Credit Transfer Receive Only, Customer Credit Transfer Send and Receive, and Customer Credit Transfer Send, Receive and Receive Request for Payment (B) Signup and view all the answers

Who configures the components of the Participation Type in the FedNow service?

Participants or Service Providers. (B) Signup and view all the answers

Which statement accurately describes the 'Maximum Transaction Value Limit – Customer Credit Transfer'?

It is a configurable amount set by Participants and/or Service Providers that applies to pacs.008 messages for the sending institution. (B) Signup and view all the answers

The 'Maximum Transaction Value Limit – Customer Credit Transfer' applies to which type of messages?

pacs.008 messages (A) Signup and view all the answers

A correspondent bank wants to receive reporting and notifications from the FedNow Service. Which participation type aligns with their needs?

Settlement Only (D) Signup and view all the answers

If a participant wants to send and receive 'Liquidity Management Transfer' messages, which participation type should they select?

Liquidity Management Transfer Send and Receive (E) Signup and view all the answers

What is the primary function of a Connection Party within the FedNow Service architecture?

To provide a central MQ connection setup and, if desired, central API setup. (A) Signup and view all the answers

How are Participant Profiles and Authorized Connection Profiles related within the FedNow Service?

Each Participant Profile maps to a Connection Party owned by an Authorized Connection Profile. (D) Signup and view all the answers

At what level is a Participant Profile established within the FedNow Service?

At the Routing Transit Number (RTN) level. (C) Signup and view all the answers

Which of the following factors determine the profile requirements for organizations using the FedNow Service?

The organization's type, role, and connection setup. (D) Signup and view all the answers

If a Financial Institution connects to the FedNow Service directly, acting as a Financial Institution, what profile requirements are applicable?

Both a Participant Profile and an Authorized Connection Profile are required. (A) Signup and view all the answers

A Financial Institution connects to the FedNow Service via one or more Service Providers. Which profile is required?

Participant Profile (C) Signup and view all the answers

What profile(s) are required when a Correspondent connects directly to the FedNow Service?

Participant Profile (C) Signup and view all the answers

A Financial Institution connects both directly and via one or more Service Providers to the FedNow service. What profiles does this Financial Institution need?

Both Authorized Connection Profile and Participant Profile. (A) Signup and view all the answers

A FedNow Service Correspondent can mitigate risk for their direct respondent(s) by utilizing which of the following options?

Setting a net send limit on their direct respondent(s). (C) Signup and view all the answers

Who configures the permissions for sending and receiving message types within the FedNow Service?

The Federal Reserve Banks, based on requests from Participants or Service Providers, with confirmation from Participants. (D) Signup and view all the answers

What happens if a Participant Profile in the FedNow Service has only one Connection Party mapped to it?

It is enabled for all relevant permissions. (D) Signup and view all the answers

Which of the following scenarios describes a permissible configuration for Receiving Credit Transfer and Payment Return Messages in the FedNow Service when a Receiving FI has multiple Connection Parties?

One Connection Party is permissioned for Receiving Credit Transfer and Payment Return Message and Nonvalue Message Receiving. (B) Signup and view all the answers

If a Participant's participation type is Liquidity Management Transfer Send and Receive, which of the following message types would not be applicable for permission configuration?

Customer Credit Transfer and Payment Return. (C) Signup and view all the answers

For a Receiving FI with multiple Connection Parties, how does the FedNow Service handle the routing of certain nonvalue messages?

The FedNow Service attempts to send nonvalue messages to the Connection Party related to the message flow. (A) Signup and view all the answers

Regarding the receipt of Correspondent Debit/Credit Notifications, what is the maximum number of Connection Parties that can be permissioned within the FedNow Service?

Two (C) Signup and view all the answers

A participant has three connection parties. One is set up to only receive Liquidity Management Transfer (LMT) messages, and another is configured to send LMT messages. Which one of the following is true?

This configuration is acceptable. (C) Signup and view all the answers

Flashcards

Authorized Connection Profile (ACP)

Defines connectivity settings for a FedNow Service participant or provider.

Connection Party

A role involving an electronic link to the FedNow Service for multiple RTNs.